STRAITS INTER LOGISTICS BERHAD (formerly known as Raya International Berhad) ("STRAITS" OR THE "COMPANY")

Transcription

1 STRAITS INTER LOGISTICS BERHAD (formerly known as Raya International Berhad) ("STRAITS" OR THE "COMPANY") I. PROPOSED ACQUISITION BY STRAITS OF 8,250,000 ORDINARY SHARES OF TUMPUAN MEGAH DEVELOPMENT SDN. BHD. ("TUMPUAN MEGAH"), REPRESENTING 55.0% EQUITY INTEREST IN TUMPUAN MEGAH, FOR A PURCHASE CONSIDERATION OF RM35,750,000 TO BE SATISFIED VIA A COMBINATION OF CASH PAYMENT OF RM7,800,000 AND THE REMAINING PURCHASE CONSIDERATION OF RM27,950,000 TO BE SATISFIED VIA AN ISSUANCE AND ALLOTMENT OF 116,458,333 NEW ORDINARY SHARES OF STRAITS ("STRAITS SHARE(S)" OR "SHARE(S)") AT THE ISSUE PRICE OF RM0.24 PER STRAITS SHARE ("PROPOSED ACQUISITION"); AND II. PROPOSED PRIVATE PLACEMENT OF 36,790,438 NEW STRAITS SHARES ("PLACEMENT SHARE(S)") AT THE SUBSCRIPTION PRICE OF RM0.24 PER PLACEMENT SHARE ("PROPOSED PRIVATE PLACEMENT"). (PROPOSED ACQUISITION AND PROPOSED PRIVATE PLACEMENT ARE COLLECTIVELY REFERRED TO AS THE "PROPOSALS") (Unless otherwise stated and wherever applicable, the amount represented throughout this announcement has been rounded to the nearest whole sen, for ease of reference.) 1. INTRODUCTION On behalf of the Board of Directors of Straits ("Board"), UOB Kay Hian Securities (M) Sdn Bhd ("UOBKH") wishes to announce the following: (i) (ii) Straits had on 7 June 2018, entered into a conditional share sale agreement ("SSA") with Raja Ismail Bin Raja Mohamed ("Vendor") for an acquisition of 8,250,000 ordinary shares of Tumpuan Megah, representing 55.0% equity interest of Tumpuan Megah ("Sale Shares") for a purchase consideration of RM35,750,000 ("Purchase Consideration"). The Purchase Consideration shall be satisfied via a combination of cash payment of RM7,800,000 ("Cash Consideration") whilst the remaining purchase consideration of RM27,950,000 shall be satisfied via the issuance of 116,458,333 new Straits Shares ("Consideration Shares") at the issue price of RM0.24 per Straits Share ("Issue Price") ("Proposed Acquisition"); and Straits had on even date, entered into subscription agreement ("Subscription Agreement") with Captain Tony Tan Han (Chen Han) ("Captain Tony Tan" or "Placee") for a private placement of 36,790,438 Placement Shares, representing 10.0% of the total issued Shares at the subscription price of RM0.24 per Placement Share ("Subscription Price"). Further details of the Proposals are set out in the ensuing sections. 1

2 2. DETAILS OF THE PROPOSALS 2.1 Proposed Acquisition The Proposed Acquisition entails the acquisition of the Sale Shares, representing approximately 55.0% equity interest of Tumpuan Megah by Straits from the Vendor for the Purchase Consideration, which will be satisfied in the following manner:- RM Cash Consideration 7,800,000 Issuance of Consideration Shares 27,950,000 Total 35,750,000 The Cash Consideration of the Purchase Consideration will be funded via the proceeds raised from the Proposed Private Placement, further details of which are set out in Sections 2.3 and 2.4 of this announcement. Please refer to Section of this announcement for further details on the mode of settlement for the Purchase Consideration. Subject to the terms and conditions of the SSA, the Sale Shares will be acquired free from any and all encumbrances (includes any interest or equity of any person or any mortgage, charge, lien, pledge, assignment, hypothecation, security interest, encumbrance, title retention or any other security agreement or arrangement or other liabilities) and with all rights, benefits and advantages accruing to those Sale Shares. Upon completion of the Proposed Acquisition, Straits will hold 55.0% equity interest in Tumpuan Megah and accordingly, Tumpuan Megah will become a subsidiary company of Straits Information on Tumpuan Megah Tumpuan Megah was incorporated on 10 December 2007 in Malaysia under the Companies Act, 1965 as a private limited company under the present name. Tumpuan Megah commenced its bunkering services in 2013 and is principally engaged in the oil bunkering services, which include ship-to-ship bunkering, barging operations and dealing in oil and petroleum products. At present, Tumpuan Megah is currently having its operations in 8 ports in Malaysia, which include, Pasir Gudang Port, Tanjung Pelepas Port, Johor Bahru Port, Kuantan Port, Kemaman Port, Kuala Terengganu Port, Labuan Port and Miri Port, all of which are licensed under Petroleum Development Act 1974 ("PDA License(s)"). Furthermore, Tumpuan Megah carries out its bunkering services via 7 vessels. The current principal markets for Tumpuan Megah consist of Malaysia and Singapore and the revenue generated is predominantly derived from the Malaysia market. At present, the customers of Tumpuan Megah mainly comprise organisations operating in oil and gas industry and marine transportation industry. 2

3 As at 31 May 2018, being the latest practicable date of this announcement ("LPD"), Tumpuan Megah has an issued share capital of RM15,000,000 comprising 15,000,000 ordinary shares ("Tumpuan Megah Shares"). Set out below are the details of the shareholders and the directors together with their respective direct and indirect shareholdings in Tumpuan Megah as at the LPD:- Name Designation Nationality/ Place of incorporation < Direct > < Indirect > No. of Tumpuan Megah Shares % *1 No. of Tumpuan Megah Shares % *1 Raja Ismail bin Raja Mohamed Director Malaysian 11,970, ,000, *2 Phoenix International Ltd *3 - Labuan, Malaysia 3,000, Dato Sri Ahmad Said bin Hamdan YAM Dato Seri Tengku Baharuddin Ibni Sultan Mahmud Director Malaysian 30, Director Malaysian Notes: *1 Based on the total issued shares of 15,000,000 in Tumpuan Megah. *2 Deemed interest by virtue of his substantial interest in Phoenix International Ltd. *3 Raja Ismail bin Raja Mohamed is the sole director and sole shareholder of Phoenix International Ltd. A summary of the financial information of Tumpuan Megah for the past 3 financial years up to the financial year ended ("FYE") 31 December 2016 is set out below:- (Adjusted) < Audited > < FYE 31 December > RM RM RM Revenue 215,442, ,885, ,694,320 Profit before taxation ("PBT") 4,706,696 1,711,110 1,498,595 Profit after taxation ("PAT") 3,160,968 1,018, ,856 Total Equity/ Net assets ("NA") 13,443,623 14,462,567 15,424,423 Total borrowings 8,647,071 5,972,245 13,411,320 Dividend declared for the financial year Total issued shares (number) 10,000,000 10,000,000 10,000,000 PBT margin (%) PAT margin (%) Gross earnings per share ("EPS") (RM) Net EPS (RM) NA per share (RM) Current ratio (times) Gearing (times)

4 For shareholders information purpose, as at the LPD, Tumpuan Megah is in the midst of finalising its audit on the financial statements for the FYE 31 December The disclosure on the audited financial statements for the FYE 31 December 2017 will be made available in the Circular to the shareholders of Straits for deliberation and approval. For the avoidance of doubt, over the past 3 financial years under review, Tumpuan Megah had adopted the Malaysian Private Entities Reporting Standard to prepare for its financial statements, which were audited by Ecovis AHL PLT. In conjunction with the Proposals and to be in compliance with Part G, Appendix 10B of the ACE Market Listing Requirements, an Accountant s Report on the financial statements of Tumpuan Megah for the latest 3 financial years will be prepared and attached together with the Circular to shareholders of Straits. Pursuant thereto, Tumpuan Megah has appointed Moore Stephens Associates PLT to prepare for the Accountant s Report for Tumpuan Megah based on the Malaysian Financial Reporting Standards ("MFRS"). There is no exceptional or extraordinary item during the past 3 financial years up to the FYE 31 December Based on the past 3 financial years up to the FYE 31 December 2016, the revenue of Tumpuan Megah were recorded at RM215,442,443, RM154,885,226 and RM148,694,320, respectively. Tumpuan Megah had also, over the past 3 financial years up to the FYE 31 December 2016, recorded PAT of RM3,160,968, RM1,018,944 and RM961,856, respectively. Further details on the financial information on Tumpuan Megah are set out in Appendix I of this announcement Basis and justification of arriving at the Purchase Consideration The purchase consideration of RM35,750,000 was arrived at, on a willingbuyer willing-seller basis, after taking into consideration the following:- (i) the aggregate profit guarantee totalling to RM10,000,000 provided by the Vendor to Straits, for the following 2 financial years ending 31 December 2019 and 31 December 2020 ("Total Profit Guarantee"). This translates to a yearly profit guarantee of RM5,000,000 for each financial year ("Yearly Profit Guarantee"). The Total Profit Guarantee provides assurance on the earnings potential of Tumpuan Megah which is expected to contribute positively to the future profitability of Straits on a consolidated basis. For the avoidance of doubt, the profit attributable to Straits based on the Yearly Profit Guarantee will be approximately RM2,750,000 for each financial year, which is 55.0% of the Profit Guarantee (based on 55.0% equity interest of Tumpuan Megah to be acquired by Straits). Based on the yearly profit guarantee of RM5,000,000, the value accorded to 100.0% equity interest in Tumpuan Megah of RM65,000,0000 represents a price-to-earnings ("PE") multiple of approximately 13.0 times of the said forward earnings. Accordingly, the 55.0% equity interest in Tumpuan Megah is valued at approximately RM35,750,000. Further details in relation to the Total Profit Guarantee are set out in Section of this announcement; 4

5 (ii) (iii) the historical profit track record of Tumpuan Megah which it had recorded PAT of RM3,160,968, RM1,018,944 and RM961,856 for the past 3 financial years up to the FYE 31 December 2016, respectively; and favourable outlook of the logistics and maritime industries premised on the Government s initiatives to improve the logistics and maritime management industries as set out in Section 4.2 of this announcement, which is expected to increase the demand for bunkering services. In addition, the Purchase Consideration also takes into consideration the potential strategic benefits to be accrued to Straits via the Proposed Acquisition such as, amongst others, an expansion of business activities of Straits by tapping into the existing market presence and customer base of Tumpuan Megah, as well as the bunkering services licenses that are currently owned by Tumpuan Megah i.e. PDA Licenses for bunkering services, PDA Licenses for the distribution and wholesale of petroleum products and petroleum materials as well as PDA License for petroleum road transportation by road tanker, as set out in Sections 3 and 4.3 of this announcement. For information purposes, PDA License grants the rights to the industry players in carrying out bunkering services, to operate petroleum transportation services and to carry out wholesale marketing of petroleum and petroleum-based materials Total Profit Guarantee (i) (ii) (iii) the Vendor agrees, undertakes and guarantees that the aggregate PAT for the FYE 31 December 2019 and FYE 31 December 2020 of Tumpuan Megah ("Profit Guarantee Period") shall be not less than RM10,000,000. as security for the Total Profit Guarantee, the Vendor agrees that Straits shall issue and deposit the Pledged Shares (as defined under Section of this announcement) into the securities account ("Securities Account") operated by a trustee company appointed by both Straits and the Vendor to hold the Pledged Shares ("Security Stakeholder"). the Vendor hereby agrees, covenants and undertakes to maintain, during the period commencing the date the Pledged Shares are deposited into the Securities Account up to the adoption of the audited financial statements as at FYE 31 December 2019 of Tumpuan Megah by the shareholder(s) of Tumpuan Megah, such amount of Pledged Shares and any additional securities added thereon ("Stakeholding Securities") in the Securities Account so that the actual total market value of the Stakeholding Securities quoted on the Bursa Securities shall not be less than RM5,500,000 being 55.0% of the Total Profit Guarantee; it being the proportion attributable to Straits ("Purchaser s Attribution"). (iv) upon adoption of the audited financial statements as at FYE 31 December 2019 of Tumpuan Megah:- a) the Security Stakeholder shall calculate the value of the Stakeholding Securities based on 5-day volume weighted average market price ("VWAP") (as quoted by Bloomberg, Malaysia) immediately prior to the date of calculation; and 5

6 b) in the event there is a PAT based on the audited financial statements as at FYE 31 December 2019 of Tumpuan Megah, the Security Stakeholder shall release all security interest over and if required, transfer such number of the Stakeholding Securities of up to an amount equivalent in value to 55.0% of the PAT of Tumpuan Megah for the FYE 31 December 2019 to the Vendor provided always that the remaining value of the Stakeholding Securities in the Securities Account shall not be less than 55.0% of the remaining Total Profit Guarantee amount which has not been met. (v) (vi) (vii) (viii) in the event the aggregated PAT for the FYE 31 December 2019 and FYE 31 December 2020 ("Total PAT") is equivalent to or more than the Total Profit Guarantee amount, the Security Stakeholder shall release all security interest over all Stakeholding Securities and where applicable, transfer the said Stakeholding Securities into the Central Depository System ("CDS") account of the Vendor. in the event there is a shortfall between the Total PAT and the Total Profit Guarantee ("Shortfall"), then the Vendor shall be liable to Straits to fully pay the Shortfall amount attributable to Straits (it being 55.0% of the Shortfall amount) to Straits but up to amount of RM5,500,000 only ("Shortfall To Purchaser"). in the event that the Vendor fails to pay Straits the Shortfall To Purchaser in full (but up to the amount of RM5,500,000), Straits shall be entitled and the Vendor hereby authorises Straits to issue a written notice to the Security Stakeholder stating the same and the amount of the Shortfall To Purchaser that remains unpaid, whereupon the Security Stakeholder is authorised to sell all or part of the Stakeholding Securities and/ or utilise all or any moneys in the Securities Account sufficient to cover the said amount. In the event the proceeds of the sale and moneys in the Securities Account are insufficient to pay all of the Shortfall To Purchaser, the Security Stakeholder shall inform the Vendor and Straits in writing of the same and the Vendor shall be liable to pay Straits such differential amounts indicated in such notice within 14 days of such notice. the Vendor s liability to pay the Shortfall To Purchaser shall be up to the aggregate amount of RM5,500,000 only. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 6

7 2.1.4 Basis and justification of arriving at the Issue Price of Consideration Shares The issue price of the Consideration Shares of RM0.24 each was determined on a willing-buyer willing-seller basis, after taking into consideration the following:- (i) a discount of RM0.007 or approximately 2.8% to the 5-day VWAP of Straits Shares up to and including 6 June 2018, being the last market date immediately preceding the date of SSA of RM For information purpose, the Issue Price represents a premium/ (discount) to the following VWAPs as follows:- Share price Premium/ (Discount) RM RM % Last transacted price as at 6 June day VWAP of Shares up to and including 6 June month VWAP of Shares up to and including 6 June month VWAP of Shares up to and including 6 June month VWAP of Shares up to and including 6 June month VWAP of Shares up to and including 6 June (0.020) (7.7) (0.007) (2.8) (0.014) (5.5) (0.010) (4.0) (0.033) (12.1) (Source: Bloomberg) Based on the above, the Issue Price represents a discount ranging from approximately 2.8% to approximately 12.1% over the last transacted price on 6 June 2018, 5-day VWAP, 1-month VWAP, 3- month VWAP and 6-month VWAP, whilst it represents a premium of approximately 0.8% to the 12-month VWAP of Shares up to and including the date prior to the date of the SSA; and (ii) the EPS of Straits Group is approximately 0.69 sen (or RM0.0069) based on the latest audited PAT of Straits Group for the FYE 31 December 2017 of RM2,526,458 divided by the total issued Shares of 367,904,380 during the same financial year of The PE multiple implied by the issue price of RM0.24 per Consideration Share is approximately 34.8 times Ranking of Consideration Shares The Consideration Shares shall, upon allotment and issuance, rank pari passu in all respects with each other and with the existing Straits Shares, save and except that the holder of the Consideration Shares shall not be entitled to participate in any dividends, rights, allotment and/ or other distributions which are declared, made or paid to the shareholders of Straits for which the entitlement date for the said distributions precedes the date of allotment and issuance of the Consideration Shares. 7

8 2.1.6 Listing of the Consideration Shares An application will be made to Bursa Securities for the listing of and quotation for the Consideration Shares to be issued pursuant to the Proposed Acquisition on the ACE Market of Bursa Securities. For the avoidance of doubt, the allotment and issuance of Consideration Shares pursuant to the Proposed Acquisition is intended to be implemented immediately after the completion of the Proposed Private Placement Mode of Settlement of the Purchase Consideration Pursuant to the terms of the SSA, the mode of settlement of the Purchase Consideration comprises Cash Consideration and Consideration Shares which shall be satisfied on the Completion Date *1 in the following manner:- Payments to be received RM % Cash Consideration *2 7,800, Consideration Shares *3 27,950, Total 35,750, Notes:- *1 Being a day falling within 45 business days after the date the last of the conditions precedent is satisfied, or such other date as Straits and the Vendor may agree in writing. *2 Payment of the Cash Consideration will be made on the Completion Date of the SSA. For the avoidance of doubt, the proceeds raised from the Proposed Private Placement will be received by the placement agent namely, UOBKH from the Placee within 5 market days from the date the last of the conditions precedent of the Subscription Agreement is satisfied. *3 On the Completion Date, the Consideration Shares shall be allocated and issued in the following manner:- Number of Consideration Shares Percentage of RM value of the the Consideration Consideration Shares Shares RM % Pledged Shares (a) Remaining Consideration Shares (b) 22,916,667 5,500, ,541,666 22,450, Total 116,458,333 27,950, (a) Pledged Shares A total of 22,916,667 Straits Shares to be pledged in a securities account agreed by Straits and the Vendor amounting to approximately RM5,500,000 based on the issue price of RM0.24 per Straits Share as security for the Total Profit Guarantee. This amount represents 55.0% of the Total Profit Guarantee of RM10,000,000 to be attributed to Straits by Tumpuan Megah under the Total Profit Guarantee. (b) Remaining Consideration Shares (after deducting the Pledged Shares) A total of 93,541,666 Straits Shares to be issued directly into the CDS Account of the Vendor. 8

9 2.1.8 Source of funding for the Purchase Consideration The Cash Consideration shall be financed via the proceeds to be raised from the Proposed Private Placement, details of which are set out in Sections 2.3 and 2.4 of this announcement Liabilities to be assumed by Straits Save for the obligation and liabilities in and arising from, pursuant to or in connection with the SSA for the Proposed Acquisition, there are no other liabilities including contingent liabilities and/ or guarantees to be assumed by Straits arising from the Proposed Acquisition Additional financial commitment required Save for the Purchase Consideration, there is no additional financial commitment required by Straits to put the business of Tumpuan Megah onstream as it is an on-going business entity with operation Information on the Vendor Raja Ismail bin Raja Mohamed, a Malaysian aged 68, is the Senior Director of Tumpuan Megah. He was appointed as a director of Tumpuan Megah in He graduated from University Sains Malaysia in 1973 with a Bachelor Degree in Arts. Raja Ismail bin Raja Mohamed started his career as a Government Administrative and Diplomatic Service Officer in 1973 and served in several different governmental departments and ministries in various positions thereafter. He was appointed as Malaysia s Trade Commissioner to Singapore from 1979 to 1981 and as Malaysia s Trade Commissioner to Brazil from 1981 to Subsequently in 1987, he served as Senior Assistant Director in the Ministry of International Trade and Industry where he was in-charged on bilateral trade issues between countries such as China, South Korea, India, Japan and Australia. He left the Ministry of International Trade and Industry in 1991 and joined the Ministry of Agriculture as Head of International Unit which he held his position until In 1994, he joined the Ministry of Domestic Trade and Consumer Affairs as director and in 2003, he served as the Head of Secretariat of the Cabinet Committee on Petroleum within the same ministry. Thereafter, he became the Senior Director of Domestic Trade Division within the same Ministry of Domestic Trade and Consumer Affairs until his retirement in Subsequently in 2008, Raja Ismail bin Raja Mohamed joined Tumpuan Megah and has since been primarily involved in formulating the overall corporate strategies of Tumpuan Megah until today. Throughout his position in Tumpan Megah, he provides strategic advice and guidance to the board of directors and the management of Tumpuan Megah on the developments in the oil and gas industry, shipping, regulatory framework and governmental policies relating to Tumpuan Megah s business activities. Raja Ismail bin Raja Mohamed is also the liason person with major customers of Tumpuan Megah and the regulatory and licensing authorities including government agencies and port authorities. He is also responsible for securing necessary approvals and licenses required for Tumpuan Megah s businesses and operations and to ensure the continued compliance with the approvals and licenses. 9

10 2.2 Salient terms of the SSA (i) Sale and Purchase of the Sale Shares In consideration of the Purchase Consideration which shall be satisfied by the Cash Consideration and issuance and allotment of Consideration Shares in favour of the Vendor, the Vendor as legal and beneficial owner shall sell and Straits relying on the warranties and representations by the Vendor contained in the SSA shall purchase the Sale Shares free from any and all encumbrances and with all rights, benefits and advantages now or hereafter attaching thereto, including all bonuses, rights, dividends and distributions declared made and paid as from the Completion Date (being 45 business days after the date the last of the conditions precedent is satisfied, or such other date as Straits and the Vendor may agree in writing) upon the terms and subject to the conditions contained in the SSA. (ii) Conditions precedent Completion of the SSA is conditional upon:- (a) Straits obtaining the approval of its shareholders for the following: i. purchase of the Sale Shares in exchange for the Cash Consideration and Consideration Shares upon the terms and conditions of the SSA; and ii. the Proposed Private Placement; (b) (c) (d) (e) Straits obtaining the approval of Bursa Securities for the listing of and quotation for the Consideration Shares (including the Pledged Shares) and the Placement Shares on the ACE Market of Bursa Securities; Straits conducting or cause to be conducted due diligence on Tumpuan Megah to the satisfaction of Straits; the completion of the Subscription Agreement with the listing and quotation of the Placement Shares on the ACE Market of Bursa Securities; and the approvals, consents authorisations, permits or waivers of any other relevant governmental or regulatory body and any other third parties necessary or appropriate to carry out the sale and purchase of the Sale Shares pursuant to the terms of the SSA having been obtained. Notwithstanding anything to the contrary, the conditions precedent shall be satisfied on or before 30 November 2018 ("Cut-Off Date"). Thereafter, Straits and the Vendor may (before or on expiry of the Cut-Off Date) have an extension(s) of time as may be agreed between them to comply with the conditions precedent. If the conditions precedent have not been fulfilled on the expiry of the Cut-Off Date or such extension of time agreed between Straits and the Vendor, then the SSA shall lapse and cease to have any further force or effect. 10

11 (iii) Events on Completion (a) (b) (c) completion shall take place on the Completion Date, which is a day falling within 45 business days (any day on which commercial banks are open for business in Kuala Lumpur and Johor but excludes Saturdays, Sundays and public holidays in Kuala Lumpur and Johor) after the date the last of the conditions precedent of the SSA is satisfied or such other date as the parties to the SSA may agree in writing. completion of the SSA shall be conditional upon all the Sale Shares collectively being sold to Straits and that Straits and the Vendor performs all their respective obligations therein. at the Completion Date, the Vendor shall deliver or cause to be delivered to Straits:- i. the resolution of the board of directors of Tumpuan Megah approving the transfer and registration of the Sale Shares in favour of Straits subject only to the transfers having been duly stamped; ii. iii. iv. the original share certificates to the Sale Shares, duly executed instrument of transfer together with such documents as may be required to give good title to the Sale Shares and to enable Straits to become the registered holder of the Sale Shares; the certified true copies of the approvals or documents referred to in Section 2.2(ii) of this announcement (conditions precedent of the SSA) if required; the resolution of the board of directors of Tumpuan Megah approving the appointment of such person(s) nominated by Straits as director(s) of the Company; v. if so required by Straits, the resignation letters of such persons as directors of Tumpuan Megah and confirming that no liability is outstanding from Tumpuan Megah to them so that the total number of directors representing the Vendor remaining after the Completion Date shall be not more than 45% of the total board members; and vi. all licences, approvals, permits and authorisations of Tumpuan Megah required for its business and operations and the completion of this SSA. The Vendor hereby agrees and undertakes to forthwith do all acts and things so as to register Straits as a member of Tumpuan Megah in the register of members of Tumpuan Megah. (d) Against the delivery of the documents set out above, Straits shall on the Completion Date: i. pay the Vendor the Cash Consideration (as set out in Section of this announcement); ii. allot and issue the Pledged Shares into the Securities Account; 11

12 iii. iv. allot and issue the remaining Consideration Shares (after deducting the Pledged Shares) ("Remaining Consideration Shares") directly into the CDS account of the Vendor and/ or his respective nominee(s); and produce and deliver to the Vendor the certified copies of the approvals, shareholders resolutions and/ or documents referred to in Section 2.2(ii) of this announcement above (conditions precedent of the SSA). (e) (f) completion is conditional on the Vendor and Straits complying with all of their respective obligations under the SSA and the listing and quotation of the Consideration Shares on the ACE Market of Bursa Securities. For this purpose, Straits shall cause the Consideration Shares to be listed and quoted on the ACE Market of Bursa Securities within 30 days from the Completion Date or such other extended period as the parties may mutually agree upon in writing. if any party fails to comply with any of its obligations and those obligations are not waived by the other party on Completion Date, then:- i. each party must return or cause to be returned to the other party all monies, Purchase Consideration and documents delivered to it or its agent under the SSA; and ii. each party must do everything reasonably required by the other party to reverse any action taken pursuant to the SSA. (iv) Breach/ Termination (a) if Straits shall fail to complete the sale and purchase of the Sale Shares in accordance with the SSA and/ or breaches any of the terms and/ or warranties of the SSA, then the Vendor shall be entitled to either: i. claim for specific performance of the SSA; or ii. terminate the SSA and upon such termination, the Vendor shall return all monies paid towards the Purchase Consideration (free of interest) in exchange against Straits paying to the Vendor all reasonable costs and expense incurred by the Vendor pursuant to the negotiation and preparation of the SSA and any incidental costs thereto; after which the Vendor shall have no other claims whatsoever against Straits and the Vendor shall be entitled to sell or dispose of the Sale Shares freely to any other party or parties. (b) if the Vendor shall fail to complete the sale and purchase of the Sale Shares in accordance with the SSA and/ or breaches any of the terms of the SSA, then Straits shall be entitled to either: i. claim for specific performance of the SSA; or 12

13 ii. terminate the SSA and upon such termination, the Vendor shall refund to Straits all monies paid towards the Purchase Consideration (free of interest) together with all reasonable costs and expenses incurred by Straits pursuant to the negotiation and preparation of the SSA and any incidental costs thereto; after which Straits shall have no other claims whatsoever against the Vendor and the Vendor shall be entitled to sell or dispose of the Sale Shares freely to any other party or parties. (c) if the Vendor shall breach any of his obligations under Section of this announcement above (obligations pursuant to the Total Profit Guarantee), Straits shall be entitled to claim for specific performance in addition to any other remedies as may be available to Straits under law and/ or equity and the Vendor shall indemnify and hold Straits harmless against all costs, charges and expenses incurred or suffered by Straits arising from such breach. 2.3 Proposed Private Placement On 7 June 2018, Straits has entered into a subscription agreement with Captain Tony Tan for a private placement of 36,790,438 Placement Shares, representing 10.0% of the total issued Shares, at the subscription price of RM0.24 per Placement Share ("Subscription Agreement"). For the avoidance of doubt, the Placement Shares will be fully satisfied in cash, in accordance with the terms and conditions of the Subscription Agreement. As at the LPD, the total issued share capital of Straits was RM41,109,619 comprising 367,904,380 issued Shares. In addition, as at the LPD, Straits has a total of 183,952,000 outstanding warrants, of which each warrant provides the right to the holder of the warrant to subscribe for 1 new Straits Share during the 5-year exercise period of up to 10 August 2022 ("Warrant(s)") at the exercise price of RM0.115 per Warrant. Assuming that none of the Warrants is exercised prior to the completion of the Proposals ("Minimum Scenario"), the Proposed Private Placement and the issuance and allotment of Consideration Shares pursuant to the Proposed Acquisition will increase the issued Shares to 521,153,151. However, assuming that all Warrants are exercised prior to the completion of the Proposals ("Maximum Scenario"), the Proposed Private Placement and the issuance and allotment of Consideration Shares pursuant to the Proposed Acquisition will increase the issued Shares to 705,105,151. Please refer to Section 6 of this announcement for further details on the effects on share capital of Straits pursuant to the Proposals Information of Placee Captain Tony Tan, a Singaporean aged 42, is the Executive Director of Straits. He obtained his Diploma in Nautical Studies from Singapore Polytechnics in In 2009, he obtained a Specialist Diploma in workplace Safety and Health from Ngee Ann Polytechnics. Captain Tony Tan has a Certificate of Competency Class 1 Master Mariner (foreign-going) issued by the Maritime and Port Authority of Singapore and also holds a Registered Safety Officer certificate issued by the Ministry of Manpower in

14 He started his career as a Marine Superintendent/ Senior Marketing Executive with EZRA Marine Services Pte Ltd in 2007 where he was responsible to ensure smooth implementation of the Safety and Environmental Management System on all the fleet vessels. Subsequently, he joined Hako Offshore Pte Ltd in 2010 as a Senior Safety Manager/ Designated Person Ashore where he was tasked to manage and implement the Safety Management System throughout the organisation and for the fleet vessels, addressing deficiencies pertaining to manning requirement and training, conducting internal audits and participating in the emergency response team, and ensuring that adequate resources and shore-based support are applied as required. He established Skips Marine Services in Singapore in 2011 and is presently the Managing Director where he oversees the business and contractual obligation to the company s clients and implementation of safety standards. Captain Tony Tan is well versed in the maritime industry and has approximately 19 years of professional marine experience in both sea-going and shore-based operations which include container, tanker, oil and gas, offshore fleet and ship management, ship operations and marine safety operations. He was also involved in audit, incident investigation as well as implementation of International Safety Management appointments. At present, Captain Tony Tan is in charge of the oil bunker and trading business segment of Straits. He is also responsible for formulating strategies to secure oil related product supplies and building customer base. As at the LPD, Captain Tony Tan does not hold any Shares and has no family relationship with other Directors and/ or major shareholders of Straits. For the avoidance of doubt, the subscription of Placement Shares by Captain Tony Tan will result in him holding 36,790,438 Shares, representing approximately 7.1% of the total enlarged Shares of 521,153,151 under Minimum Scenario, or approximately 5.2% of the total enlarged Shares of 705,105,151 under Maximum Scenario, in which he will emerge as the substantial shareholder of the Company Basis of determining and justification for the Subscription Price of the Placement Shares The Placement Shares will be placed out at subscription price of RM0.24 per Placement Share which is similar to the Issue Price for the Consideration Shares. The Subscription Price was arrived at between Straits and the Placee on a willing-buyer willing-seller basis, and after taking into consideration that a discount of not more than 10.0% to the 5-day VWAP of Straits Shares, up to and including 6 June 2018, being the last market date immediately preceding the date of Subscription Agreement. For the avoidance of doubt, the Subscription Price represents a discount of RM0.007 or 2.8% to the 5-day VWAP of of Straits Shares, up to and including 6 June 2018, of RM Ranking of the Placement Shares The Placement Shares shall, upon allotment and issuance, rank pari passu in all respects with the existing Shares, save and except that the Placement Shares will not be entitled to any dividends, rights, allotments and/ or any other forms of distribution where the entitlement date of such dividends, rights, allotments and/ or any other forms of distribution precedes the relevant date of allotment and issuance of the Placement Shares. 14

15 2.3.4 Listing of and quotation for the Placement Shares An application will be made to Bursa Securities for the listing of and quotation for the Placement Shares on the ACE Market of Bursa Securities Utilisation of proceeds Based on the subscription price of RM0.24 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of RM8,829,705. The proceeds are intended to be utilised by Straits in the following manner:- Details of utilisation Timeframe for utilisation Amount of proceeds RM Cash Consideration for the Proposed Acquisition *1 Estimated expenses in relation to the Proposals *2 Upon completion of the Proposed Acquisition Upon completion of the Proposals 7,800,000 1,029,705 Total 8,829,705 Notes:- *1 As set out in Sections 2.1 and of this announcement, the gross proceeds raised from the Proposed Private Placement will be utilised as the Cash Consideration of the Purchase Consideration for the Proposed Acquisition. *2 The estimated expenses consist of professional fees, fees payable to authorities, placement fee and other incidental expenses in relation to the Proposals. Any variation in the actual amount of expenses will be adjusted to/ from the Company s working capital requirement. 2.4 Salient terms of the Subscription Agreement (i) Subscription Price Subject to the terms and conditions of the Subscription Agreement, Straits agrees to allot and issue to the Placee and the Placee agrees to subscribe for 36,790,438 Placement Shares at the subscription price of RM0.24 per Placement Share, amounting to RM8,829, ("Total Subscription Price"). (ii) Conditions precedent Issuance and allotment of the Placement Shares are conditional on the following:- (a) Straits obtaining the approval of its shareholders for the following:- i. issuance and allotment of Placement Shares in accordance with the terms and conditions contained in the Subscription Agreement; and ii. the Proposed Acquisition; (b) Straits obtaining the approval-in-principle of Bursa Securities for the listing of and quotation for the Placement Shares on the ACE Market of Bursa Securities. 15

16 The conditions precedent of the Subscription Agreement shall be satisfied on or before 30 November 2018 ("Placement Cut-Off Date"). Thereafter, Straits and the Placee may (before or on expiry of the Placement Cut-Off Date) have an extension(s) of time as may be agreed between Straits and the Placee to comply with the conditions precedent of the Subscription Agreement. If the condition precedent of the Subscription Agreement has not been fulfilled on the expiry of the Placement Cut-Off Date or such extension of time agreed between Straits and the Placee and Straits does not waive the fulfilment of the same, then the Subscription Agreement shall lapse and cease to have any further force or effect and neither Straits nor the Placee shall have any further rights against the other(s). The Subscription Agreement shall become unconditional on the date of which the last of the condition precedent for the Subscription Agreement is fulfilled or obtained. (iii) Completion and payment Within 5 business days from the date the Subscription Agreement becomes unconditional, the Placee shall:- (a) (b) deposit with the placement agent, namely UOBKH the Total Subscription Price by way of telegraphic transfer to a bank account nominated by the placement agent and notified Straits and the Placee at least 5 business days prior to the date the payment for the Total Subscription Price was made; and notify Straits in writing of the details of the Placee s stockbrokers and the particulars of the securities account into which the Placement Shares are to be credited. Upon the placement agent receiving the Total Subscription Price and within 5 business days from the payment for the Total Subscription Price was made:- (a) (b) (c) (d) the placement agent shall confirm to Straits of such receipt; Straits shall allot and issue the Placement Shares to the Placee; Straits shall deliver or caused to be delivered to Bursa Malaysia Depository Sdn Bhd the share certificates for the Placement Shares registered in the name of Bursa Malaysia Depository Sdn Bhd; and Straits shall instruct and procure Bursa Malaysia Depository Sdn Bhd to credit the securities account of the Placee with the Placement Shares. Completion shall take place on the listing date of the Placement Shares on the ACE Market of Bursa Securities, and on such event, the placement agent is authorised by Straits and the Placee to release the Total Subscription Price to Straits. 16

17 (iv) Default In the event that the Placee shall for any reason fail or refuse to complete the subscription of the Placement Shares under the terms of the Subscription Agreement or the Placee fails to comply with all the obligations or stipulations contained or defaults in the Subscription Agreement and does not remedy the same to the satisfaction of Straits within 14 days from the date of receipt of written notice by Straits or such breach is not waived by Straits at its absolute discretion, Straits shall be entitled to, without prejudice to its other rights and remedies including its right to sue for (i) specific performance of the Subscription Agreement; or (ii) terminate the Subscription Agreement and recover all amounts actually paid and expanded pursuant to or arising from the Subscription Agreement 3. RATIONALE AND JUSTIFICATION FOR THE PROPOSALS 3.1 Proposed Acquisition The Proposed Acquisition entails the acquisition of 55.0% equity interest of Tumpuan Megah, a company engaged in the businesses of bunkering services, barging operations and dealing of oil, petroleum and petroleum-related products, which are similar to the current core business activities of Straits. Due to the similarity in the business nature of both Straits and Tumpuan Megah, the Proposed Acquisition is a horizontal acquisition by Straits to acquire its peer with the intention to expand its existing business activities of bunkering services and oil trading, which is expected to enhance the revenue and earnings of Straits and its subsidiaries ("Straits Group" or "Group") moving forward. As set out in Section of this announcement, Tumpuan Megah is currently having its operations in 8 ports within Malaysia (including Peninsular Malaysia and East Malaysia). Furthermore, Tumpuan Megah currently operates through 7 licensed vessels to undertake its core business activities. As such, the Proposed Acquisition would enable Straits to have an immediate expansion in respect of its fleet size and assets base from the current 2 vessels to 9 vessels for its operations. With such expansion of asset base, Straits Group is capable to undertake higher volume of bunkering services, thereby increase its operational capacities. Furthermore, Straits could also enjoy an enlarged customer base by tapping into the existing customer base of Tumpuan Megah. This would then allow Straits Group to capture larger market share and increase its market presence in the bunkering services industry in Malaysia thereby lifting its competitiveness and sustainability in the marine logistics industry. Additionally, through the Proposed Acquisition, Straits could enlarge its suppliers pool of oil products which encompasses both its existing suppliers and new suppliers from Tumpuan Megah. With the enlarged suppliers pool, it enables Straits to reap such competitive advantage in sourcing its supplies at relatively competitive prices. 17

18 The Proposed Acquisition bodes well with the Board s intention to expand its oil trading and bunkering services by identifying any potential business/ investment opportunity. The Board believes that the Proposed Acquisition would provide an additional revenue and income source to Straits Group moving forward, premised on the fact that the PATs recorded by Tumpuan Megah for the past 3 financial years up to the FYE 31 December 2016 and the total profit guarantee of RM10,000,000 provided by the Vendor to Straits for a period of 2 financial years up to the FYE 31 December 2020, of which the profit to be contributed to Straits will be amounting to RM5,500,000, being 55.0% equity interest of Tumpuan Megah to be held by Straits. Barring any unforeseen circumstances, the achievement of the Total Profit Guarantee by Tumpuan Megah would improve the consolidated earnings and cash flows position of the Group throughout the Profit Guarantee Period. 3.2 Proposed Private Placement After due consideration of the various methods of funds raising, the Board is of the view that the implementation of the Proposed Private Placement is the most ideal avenue to instantaneously raise funds to partially satisfy the Purchase Consideration for the Proposed Acquisition. Through the execution of the Subscription Agreement, the Proposed Private Placement provides certainty in respect of the source of funding whereby the Placee and the Subscription Price have been identified and agreed upfront, which also gives more assurance to the successful completion of the Proposed Acquisition and the Proposed Private Placement. Furthermore, the Proposed Private Placement would fulfil the funding requirements within short period of time against other funds raising options such as rights issues exercise and/ or bank borrowing in which the application processes typically consume longer period of time. For the avoidance of doubt, the full payment of the Total Subscription Price shall be remitted by the Placee to placement agent within 5 market days from the date of the EGM. Furthermore, the Proposed Private Placement is also the most efficient avenue for funds raising as it enables the Group to raise funds with a relatively lower costs and expenses against other form of financing options such as bank borrowings, which will increase the debt obligation and interest costs to the Group. This would allow the Group to preserve its existing cash flow for its operational purposes and for its future business investment opportunities. 4. INDUSTRY OVERVIEW AND OUTLOOK AND FUTURE PROSPECTS OF TUMPUAN MEGAH AND THE ENLARGED STRAITS GROUP 4.1 Overview and outlook of the Malaysian economy The Malaysian economy expanded by 5.4% in the first quarter of 2018 (4Q 2017: 5.9%), driven by continued growth in private sector spending (5.2%; 4Q 2017: 7.4%) and strong growth in net exports (62.4%; 4Q 2017: 2.3%). On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.4% (4Q 2017: 1.0%). Domestic demand driven by the private sector Domestic demand recorded a moderate growth of 4.1% (4Q 2017: 6.2%), due to lower growth of private sector expenditure (5.2%; 4Q 2017: 7.4%) and a marginal decline in public sector spending (-0.1%; 4Q 2017: +3.4%). Private consumption registered a sustained growth of 6.9% (4Q 2017: 7.0%), supported by continued strength in wage and employment growth. 18

19 Growth of private investment moderated to 0.5% (4Q 2017: 9.2%). Private investment was weighed down by lower capital spending in structures, particularly in residential and commercial properties, and machinery and equipment during the quarter. On a sectoral basis, private investment was supported mainly by the services sector, particularly the education and healthcare sub-sectors. Public consumption growth was lower at 0.4% (4Q 2017: 6.8%) on account of lower expenditure on supplies and services. Public investment continued to decline in the first quarter (-1.0%; 4Q 2017: -1.4%), attributed to the contraction in spending on fixed assets by public corporations. The lower capital spending by public corporations was due mainly to the near completion of a few large-scale projects. Gross fixed capital formation (GFCF) growth moderated to 0.1% (4Q 2017: 4.3%). By type of assets, capital spending on machinery and equipment registered a contraction of 3.6% (4Q 2017: +8.3%). Investment in structures grew more moderately (2.8%; 4Q 2017: 3.3%) while investment in other types of assets recorded a smaller decline of 0.2% (4Q 2017: -6.8%). Continued expansion across major economic sectors On the supply side, services and manufacturing sectors remained the key drivers of growth. The services sector expanded at a faster pace during the quarter. The improvement was attributed mainly to higher growth in the finance and insurance sub-sector, resulting from higher lending activity, particularly in the household segment. Growth in the information and communication sub-sector also improved, driven by increased demand for data communication services. The wholesale and retail trade sub-sector continued to expand, supported by sustained strength in household spending. The manufacturing sector registered sustained growth in the quarter supported by improvements in the export-oriented industries and construction-related cluster. These offset the sharp moderation in the consumer-related clusters, which was mainly due to slower production of food-related items and transport equipment. Stronger output growth in the primary-related cluster (e.g. chemical- and petroleumrelated products) was supported by higher oil production. The higher growth in the E&E cluster reflected the continued expansion of the global technology upcycle. Higher growth in the construction-related cluster was in line with the strength of civil engineering activities during the quarter. Growth in the construction sector moderated in the quarter. While growth of the civil engineering sub-sector was stronger, supported by the transportation, petrochemical and power plant projects, the sector s performance was affected by weaker activity in the residential and non-residential sub-sectors. This is consistent with the significant number of unsold residential properties and the ongoing weaknesses in the commercial property segment (oversupply of office spaces and shopping complexes). Growth in the Malaysian economy to remain favourable in 2018 In 2018, growth is projected to remain favourable, with domestic demand as the key driver of growth. The positive growth prospects are supported by continued spill overs from the external sector to domestic economic activity. Trade performance is expected to benefit from favourable global demand, new export production capacity and exposure to the global technology cycle. (Source: Economic and Financial Developments in the Malaysian Economy in the First Quarter of 2018, Bank Negara Malaysia) 19